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Japan puts aside Russia row for sake of economy

By ELAINE KURTENBACH AP Business Writer

Posted:
04/27/2013 11:04:02 PM MDT

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FILE - In this Feb. 7, 2013 file photo, Japanese Prime Minister Shinzo Abe delivers his speech reiterating Japan's demand to Russia to return the four-island chain, known as the Northern Territories in Japan and the Kuril islands in Russia, during a national rally marking the Northern Territories Day in Tokyo. Japan's relations with Russia are taking a decidedly business-like turn, as the two countries put economic imperatives ahead of a longstanding territorial dispute. Abe heads this weekend to Moscow on the first leg of an "economic diplomacy" tour to Russia, Turkey and the Middle East aimed at building business ties and possibly reaching a breakthrough with Moscow.

TOKYO—Japan's relations with Russia are taking a decidedly business-like turn, as the countries put economic imperatives ahead of a longstanding territorial dispute.

Prime Minister Shinzo Abe heads this weekend to Moscow on the first leg of an "economic diplomacy" tour to Russia, Turkey and the Middle East aimed at building business ties and possibly reaching a breakthrough with Moscow.

Japan and Russia have yet to sign a peace treaty formally ending hostilities from World War II thanks to a group of four islands north of Hokkaido that were captured by Russian forces at the war's end.

Yet, the legacy of antagonism over the islands was utterly absent from a forum of businessmen gathered this week in one of Tokyo's poshest hotels to drum up Japanese investments in the Russia's Far East island of Sakhalin.

The discussions of huge energy projects planned or already built suggest that economic prerogatives are overriding other concerns as both sides focus on their mutual interest in boosting trade and investment. With rival China also pursuing closer energy cooperation, Japan has more incentive than ever to put historical roadblocks aside and get down to business.

Abe said recently he will seek to resume stalled talks on the territorial dispute when he meets Russian President Vladimir Putin, the first official visit by a Japanese prime minister to Moscow in a decade. He told parliament said he hoped to build "new momentum" and set a future course for relations during his visit.

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He will also visit Turkey, where Japan is hoping to seal a deal to export nuclear technology, Saudi Arabia and the United Arab Emirates.

An actual deal on what the Japanese call the "Northern Territories" during Abe's visit is unlikely during this visit to Moscow, said Kazuhiko Togo, a former senior diplomat who heads the Institute for World Affairs at Kyoto Sangyo University.

However, the meeting will be "extremely important," he said. "Putin and Abe would gauge each other whether this is a counterpart trustworthy enough to make crucial and extremely difficult decisions together. If they succeed, then the future of our relationship would be in good hands. If not, then it would not be promising."

Former Prime Minister Yoshiro Mori, who often acts as a senior statesman on Tokyo's behalf, visited Moscow in February. He says he is hoping the leaders will agree on building a new relationship and meeting more often.

At issue is Japan's longtime insistence that it must get back all disputed islands—Etorofu, Kunashiri, Shikotan and the Habomai islets, Mori told the English-language newspaper The Japan Times.

A compromise is needed, Mori said.

"If the stance is 'absolutely four islands' should be returned, the current stalemate will just continue," the paper quoted Mori as saying.

"In my experience, if the Japanese government doesn't react within a year the window will close," he said.

Since taking office in late December, Abe has sought to highlight Tokyo's interest in building closer ties with Southeast Asia to help drive economic growth and offset the fallout from tensions with Beijing over a territorial dispute in the East China Sea. He says "economic diplomacy" is a priority for reviving the sluggish economy.

After Russia, he is due to visit Saudi Arabia, the United Arab Emirates and Turkey, where negotiations are underway for a major nuclear power technology deal, officials say.

Russia's Far East is keen to attract more Japanese investment in its energy sector and in construction of the infrastructure it needs for closer trade ties with the rest of the Asia-Pacific region.

"From the 1990s, Japan has been providing significant support to Russia's energy sector," Takashi Nishioka, president of the Association for Trade with Russia and the Newly Independent States, said in an address to the forum in Tokyo on Wednesday.

"Prime Minister Abe's visit to Moscow will pave the way for greater Japan-Russia economic cooperation," he said.

Japan, the world's biggest consumer of natural gas, imports 39 percent of the liquefied natural gas from Sakhalin I, a huge, multinational project between Russia's Rosneft, Japan's Sodeco, ExxonMobil and other major partners that pooled resources to exploit the reserves found off the island's coast in the 1970s and 1980s.

The closure of most of Japan's nuclear power plants following the disaster in Fukushima has boosted demand for LNG and other conventional fuels.

In 2012, imports by Tokyo Electric Power Co., or TEPCO, from Sakhalin rose to 3 million tons a year from the 2 million it had been importing since 2009.

"The Sakhalin project will be of even greater importance as an energy source in the future," said Hitoshi Nishizawa of Tokyo Electric Co.'s Fuel and Power Company, Japan's biggest power utility.

The sensitive environment, harsh northern climate and volatile seismic of the region, which lies right along the "Ring of Fire" call for special technology and equipment from global suppliers, he said, noting that Japan is supplying pipes used for the project.

The Sakhalin project is creating "a whole range of business opportunities for the region," said James Taylor, president of Exxon Neftegas Ltd.

Apart from oil and gas, participants outlined plans to expand port facilities to accommodate huge post-Panamax freighters and very large tankers and to build rail links between Sakhalin and the Eurasian mainland and with Japan and between and the Russian Far East and North America, via the Bering Strait.

Japan has equipment and technology well suited for power grids in the Russian Far East that might connect to Hokkaido, said Sergey N. Tolstoguzov, president of RAO Energeticheskiye sistemy Vostoka OAO, a Russian power company.

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